What Is a tax Self-Assessment and Why Is It Important? Are you confused about Self-Assessment tax returns? This article explains what they are, why they matter, and how to complete them. Self-Assessment tax returns are a system that HMRC uses to collect income tax. Individuals who have earned income that HMRC doesn’t yet know about, such as profit from a business, usually have to report that income to HMRC in a Self-Assessment tax return. A Self-Assessment tax return shows how much an individual has earned, and from what sources, over the course of a tax year. Many property business owners have to prepare a tax return by Self-Assessment, send it to HMRC, and pay their tax bill by 31 January every year. If you’re unsure what is a self-assessment tax return and if you need to complete a self-assessment to send to HMRC, read this guide. What are the basics of Self-Assessment tax returns? As property accountants serving thousands of UK landlords that purchase buy to let properties, we know that many clients are confused about what is a Self-Assessment tax return and when they need to file it. A Self-Assessment tax return is submitted by individuals online or by paper annually. You are responsible for informing HMRC that you need to file a Self-Assessment tax return. Do not wait for them to contact you first. People with other income including Covid-19 grants and support payments must report it in a tax return by Self-Assessment. If you are self-employed, you always have to complete a Self-Assessment tax return, unless your trading income is exempt under the trading allowance. It does not matter if you make a profit or loss from your self-employment, or if you actually begin to trade as self-employed once you have registered with HMRC. You must send a Self-Assessment tax return if, in the last tax year (running from 06 April to 05 April), any of the following applied: you were self-employed as a sole trader and earned over £1,000, or if you were a partner in a business, or you earned £100,000 or more. I appreciate that knowing what is Self-Assessment for tax purposes can be confusing and daunting for some people. Many of my clients ask what is Self-Assessment and if they need to complete a Self-Assessment tax return when they first visit me. Visit here to get an overview from HMRC of Self-Assessment tax returns. Are you paying more tax than you need to? I know that none of my clients want to pay more tax than they need to. This is why me and my team of tax experts work with 1,000s of property investors annually to help them to reduce their tax bills. This includes making their businesses as tax-efficient as possible. One of the most important ways of doing this is by filing the right Self-Assessment tax returns on time every year. If you receive any untaxed income, you might need to complete a tax return. Common situations are: you are self-employed (unless this income is within the annual £1,000 trading allowance) you are a partner in a business you are a company director and have income on which tax is due that is not taxed under PAYE you have property income you want to claim tax relief on employment expenses over £2,500 in a year you have to pay a tax charge on child benefit you have untaxed savings income you have Capital Gains Tax to pay I advise you to get professional tax accountancy advice if you are unsure. The above is not a complete list. If HMRC have not asked you to file a tax return for a year then you might have a separate legal duty to notify them that you are liable to Income Tax, Capital Gains Tax, or Class 2 or 4 National Insurance. This is so thay they can issue you with a tax return to complete, or otherwise collect the amounts due in some other way. There are a number of exceptions to this obligation to notify HMRC, such as where all of your income was taxed under PAYE and you have no chargeable gains. I recommend that you get professional advice if you are unsure what is a Self-Assessment tax return and how to file one. How to pay less tax through Self-Assessment Taxpayers can complete and file their Self-Assessment tax return online via the HMRC website or by using tax return software. Individuals who cannot file online may also be able to download and complete paper forms. It is vital to pay the minimum amount of tax due on a Self-Assessment. My team of tax experts specialise in helping clients to pay less tax through Self-Assessment. In order to complete and file their Self-Assessment tax returns, sole traders and business partners will need various items of information including their UTR number, records of expenses, records of invoices and records of other business income. Limited Company Directors who have to complete and file a Self-Assessment tax return will also need various pieces of information including their UTR number, their P60 and their P11D. Limited Company shareholders may also need to provide proof of any Dividends received during the tax year. Taxable income and gains must be included on a Self-Assessment tax return. Such items could include: Details of self-employment income and expenses Details of property income and expenses Emplyment and pensions information Details of rental property income and expenses Interest certificates from banks or building societies Details of any chargeable capital gains made I recommend that you keep any invoices for work you have done, any receipts for expenses paid, bank statements, statements from letting agents, and information showing how you have taken account of any private use of things for your property business. What you should do next In 2015, the government announced their intention to abolish the Self-Assessment tax return and introduce a digital reporting system called Making Tax Digital for Income Tax. HMRC are still developing and testing aspects of this system. Making Tax Digital is due to be introduced in April 2026 for some taxpayers, with others joining in from April 2027. It might be tempting to read this article and do nothing about Self-Assessment tax returns. To ensure that you do not pay more tax than you need to, I strongly advise you to book in time here with my team.
